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Facebook's co-founder warns of Libra's encryption. | Technology

One of Facebook co-founders has warned that social networking plans for a digital currency called Libra could allow companies involved in the plan to exercise power over nations.

Chris Hughes, whose role in the first days of Facebook gave him a net worth estimated at $ 430 million (£ 340 million), said global regulators should intervene to slow the progress of crypto-economics.

Facebook is developing the Libra from a base in Switzerland in collaboration with 27 other companies, such as Mastercard, Paypal, Uber and Vodafone, collectively known as the Libra Association.

What is Libra?

Facebook says the Libra is a "global monetary and financial infrastructure" – a digital package created by Facebook and powered by a new blockchain version created by Facebook, the encrypted technology used by bitcoin and other cryptocurrencies. The name Libra comes from the basic Roman weight measurement. The abbreviation lb for the pound is derived from Libra and the symbol £ comes originally from an elaborate L to Libra.

Why does Facebook start encryption?

Facebook claims it wants to reach 1.7 billion people around the world who do not have access to a bank account.

Who is responsible for Libra?

Facebook is likely to face regulatory hurdles and antitrust concerns. The currency will be served by a group of companies called the Libra Association. It works as what is known as "stablecoin", linked to existing assets such as the dollar or the euro, aiming to degrade less than the instability faced by many cryptic frequencies.

The Libra Association is described by Facebook as an independent non-profit organization based in Switzerland. The Libra Association will be an administrative body called the Libra Association Council, which will consist of one representative from each member of the association, who will vote for political and operational decisions.

Facebook claims that even though it created the Libra Association and the Libra Blockchain, as soon as the currency starts in 2020, the company will leave a leading role, and all members of the union will have equal votes in Libra's governance. Companies that contributed at least $ 10 million (GBP 8 million) to register as founding members of the Libra Association include technology companies such as PayPal, Ebay, Spotify, Uber and Lyft, as well as financial and venture capital companies such as Andreessen Horowitz, Thrive Capital, Visa and Mastercard.

How and when can I use it?

When encryption begins, users can download the Calibra, a digital wallet, which will allow them to send it to anyone with a smartphone. It will be available in Messenger, WhatsApp and as a standalone application.

It is not clear in which countries the coin will start, although Facebook said that "almost no one" in the world with a smartphone will be able to download the application.

Kary Paul in San Francisco

Photo: Chesnot / Getty Images Europe

"If moderate success, the Libra will deliver much of monetary policy control from central banks to these private companies […], "Said Hughes, co-chair of the anti-poverty campaign group, for the Financial Security Plan.

"If global regulators do not act now, they could soon be too late."

Mark Carney, Governor of the Bank of England, offered a careful welcome to Libra in his speech at Mansion House's annual dinner on Thursday night.

But in an article on the Financial Times, Hughes warned that companies participating in the Libra Association, which have placed $ 10 million each in the project, will be in a position to "disturb and weaken" nations.

He warned that if several people in the emerging economies negotiate the local currency for Libra would threaten the ability of governments to manage their own fiscal policy. Emerging governments should put a temporary ban on local banks and payment processors to accept the currency until the consequences are studied, he said.

"What Libra supporters call" decentralization "is in fact a shifting of power from developing global central banks to multinational corporations and the US Federal Reserve and the European Central Bank," said Hughes.

He added that if Libra is successful, Facebook and its associates will have unjustified authority to develop a critical global technology such as identifying verification and effective writing of rules on issues such as privacy and reaction the theft.

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Hughes said that anyone who believes his fears are excessive should consider how Facebook had a huge, sometimes negative, effect on other social strata.

"The company's decision to offer a live broadcast has allowed teenagers to hunt intimidation, terrorists to live a show and the actor to score massively," he said.

"It has also turned mobile messaging and news and journalism faster than many imagined."

The Guardian has approached Facebook for comments.

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